Why Triumph Group Stock Tanked 10% After Beating Earnings

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What happened

Shares of airplane parts-maker Triumph Group (NYSE:TGI) stock tumbled 10.6% through 1:30 p.m. EDT Thursday despite the company beating on both the top and bottom lines in its fiscal Q4 2021 earnings report this morning (yes, you read that right — Triumph’s calendar runs a little ahead of everyone else’s).

Expected to earn only $0.08 per share (pro forma) on just $436.3 million in sales, Triumph instead reported a $0.10 per share adjusted profit, and quarterly sales of $466.8 million. Its stock fell anyway.  

Big red arrow going down over a stock chart

Image source: Getty Images.

So what

Even with passengers slowly starting to report to their departure gates once again, the airline industry was hit hard by the pandemic and is still just limping along, so no one was expecting much in the way of good news from Triumph’s report. Still, the scale of Triumph’s bad news was pretty discouraging.

Although pro forma profits were positive, when calculated according to generally accepted accounting principles (GAAP), Triumph’s earnings remained deeply in the red in Q4 2021, with losses per share of $1.27 — even worse than last year’s fiscal Q1 2020 loss of $1.51 per share. Sales during the quarter declined 33% year over year, and Triumph booked a 10% negative operating margin on those sales.

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So, maybe the results were not as bad as Wall Street feared. They were still pretty awful, and viewed in that context, perhaps today’s sell-off shouldn’t be so surprising.

Now what

And yet, not all the news was bad. Q4’s operating margin, while horrible, was better than Triumph’s full-year operating margin of negative 17%. Its quarterly loss was far less than just one-quarter’s worth of the $8.55 per share that it lost across the four quarters of fiscal 2021. And as Triumph pointed out, it did generate positive free cash flow ($16.6 million) in Q4. For the full year, Triumph burned cash.

In fact, as Triumph noted, it has now generated positive cash in two successive quarters and, with “increased efficiencies and the benefits of robust cost reduction actions,” the company says it’s seeing “measurable recovery toward pre-COVID levels across both business units.”

With COVID-19 still lingering, the company says it’s still unable to provide accurate financial guidance for how the rest of this year will play out — but things do at least appear to be getting better, not worse.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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